Will Renewables Suffer Because Of U.S. Oil And Gas Boom

The U.S. may or may not have achieved energy independence in 2013. There is much debate about what that phrase means and when it might (or already did) happen. But the year just passed will definitely be remembered as a time when oil and natural gas markets started changing quickly and perceptions about America's role in world energy markets changed as well.

And we begin this hour with a milestone of 2013, a remarkable feat with far-reaching implications both at home and abroad. According to the Energy Information Agency, the United States became the world's biggest producer of oil and natural gas. NPR's John Ydstie has more on the turnaround in America's energy fortunes.

JOHN YDSTIE, BYLINE: Robin West, who studied the oil and gas industries for more than a quarter of a century, says developments in the U.S. energy sector are a very big deal.

ROBIN WEST: What's happened to the United States is the energy equivalent of the Berlin Wall coming down. This is a transformational event.

YDSTIE: West recently sold his energy consulting firm to IHS Global Insight, where he's now an advisor.

WEST: It's a big deal in terms of U.S economic activity, substantial reduction of our trade imbalance, the strength of the dollar. This affects everything.

YDSTIE: Only a decade ago, the U.S. was building terminals to import natural gas. But the application of fracking technology in U.S. shale formations expanded natural gas production so much that some import terminals are being turned into export terminals. U.S. natural gas prices have fallen to about a quarter of what they are in some other parts of the world. That's driven down electricity bills for many homeowners and given U.S. manufacturers a competitive edge.

Fracking for oil has raised the output of U.S. liquid energy by a million barrels a day in 2013 and by about the same amount in 2012, says Dr. Mark Schwartz, CEO of PIRA, an energy research and consulting firm.

MARK SCHWARTZ: We are seeing the fastest liquids growth over a four-year period that we've ever seen anywhere in the word. One exception, Saudi Arabia from '70 to '74 was a little bit faster.

YDSTIE: Schwartz says that's helped hold down the price of gasoline.

SCHWARTZ: I think if you look at what the expectations were a couple of years ago, it was probably that we were going to see $4 and heading up. And now, we're down in the mid-threes per gallon with a reasonable chance that that's as likely to go down as up over the next couple of years.

YDSTIE: The boom in U.S. production has helped keep the global price of oil and gasoline down despite the loss of production in places like Libya and Iran. Robin West says the boom is also affecting geopolitics, including the effectiveness of the sanctions on Iran.

WEST: It's given, frankly, policymakers much more flexibility. I mean, there's been almost no negative economic impact from it because we've been able to replace that Iranian crude.

YDSTIE: Booming oil production on the North American continent is rapidly diminishing U.S. dependence on oil exported from the Middle East. But West says the U.S. still has to pay global prices for oil, so it can't ignore conflicts and potential disruptions in the Middle East.

WEST: So, I think, we're going to have a continuing role in that part of the world whether we like it or not.

YDSTIE: The U.S. oil and gas boom has not occurred without serious controversy over the environmental effects of fracking. It could also dampen the development of renewable energy, says Dan Kammen, an energy and resources professor at UC Berkeley.

DAN KAMMEN: Now, if you're looking at projects purely based on today's economics, gas is looking cheaper and cheaper. And it certainly makes financing renewable energy projects more difficult.

YDSTIE: But Kammen believes natural gas can help the transition to wind and solar, energy sources which are inherently intermittent.

KAMMEN: The way you do it is to utilize the ability to fire up more gas plants and to use them when the sun isn't shining or the wind isn't blowing. The challenge, though, is not to become over dependent.

YDSTIE: Kammen says that requires robust government policies that paint a road map to a near carbon-free energy system by the middle of the century. Gas is pushing dirtier coal out of the energy picture right now. But there will clearly be an intense debate about whether this energy revolution will pave the way to renewables or extend the dominance of carbon fuels in America's future. John Ydstie, NPR News, Washington.

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